Saudi Arabia on Wednesday executed seven men for an armed robbery committed when they were under 18, state media reported, despite an appeal for clemency by United Nations human rights investigators.
The seven, sentenced to death in 2009 for a crime committed in 2006, had been due to die last week, but were granted a stay of execution while the authorities reviewed their case.
(Reuters) – The Dow Jones industrial average is at an all-time high, the jobless rate has fallen to a four-year low and the housing market is seeing a recovery, but for many lower income and middle class Americans, the improving economy has yet to take hold.
Instead, they are anxious enough about higher gasoline prices and a payroll tax increase to slash their spending.
An online poll of 1,538 people conducted March 4-8 by Reuters/Ipsos found that two-thirds of adults say they are cutting their monthly spending and almost all of the rest say their spending is little changed
The biggest reason given by those who said they are cutting spending – 72 percent of those polled – was increasing savings and paying off debts. The second biggest was higher gas prices, cited by 63 percent.
Of those cutting back specifically because of gas prices or tax increases, 81 percent said they are cutting down on meals at restaurants, 73 percent are reducing entertainment costs such as movies and concerts and 62 percent are spending less on travel and vacations.
At the same time, affluent consumers are showing signs of increased confidence, according to at least one recent survey. This bifurcation may play into concerns about income inequality and could add to pressure on President Barack Obama and Democrat lawmakers in Congress to resist any budget deficit cutting deal that reduces spending on the social safety net and doesn’t include further taxes on the wealthy.
Some of those polled were willing to talk about why they were curbing spending.
Donna Gilbert doesn’t even go all the way downstairs in her Webster, New Hampshire, house because it costs too much to heat. “We don’t turn the heat on that much anymore. We use the wood stove … We have plenty of trees, thank God. We’ve cut back on just about everything. We don’t use the basement anymore,” said Gilbert, 59, who is disabled and consolidates grocery shopping trips to save on gas money.
Another who indicated in the poll that he has to be very careful over what he spends is Bob Fell. Once a millionaire as a member of the family behind Chicago’s Fell Co clothing stores, he’s now bankrupt, driving a 10-year-old truck he can’t afford to replace.
“Things got tougher and tougher, my business got almost impossible, all the small businesses were going out of business, credit was bad,” said Fell, 75. “Now, we’re playing catch-up. We’re not going anywhere until we catch up a little bit. We’re just starting to get our head above water.”
It is not just luxuries that are being hit, though – 61 percent of those cutting spending said they would look to save money on clothes and shoes and 43 percent were planning on cutting spending at the grocery store too.
NOT ALL NEGATIVE
To be sure, people don’t always do what they say in such surveys, which makes life difficult for economists. There are also positive signs.
Friday’s jobless figures show that U.S. employers added 236,000 workers to their payrolls in February and the unemployment rate fell to 7.7 percent, the lowest since the financial crisis started to devastate the economy in December 2008.
U.S. stock prices, as measured by the Dow Jones industrial average, have gained 10 percent so far this year and are up 123 percent since the financial crisis-era low on March 9, 2009. The gains, together with a 7 percent recovery in housing prices in the past year, will tend to help those who own homes and those who have pension and mutual funds.
There is also a lot going on in the boom towns spawned by the rapid growth in domestic oil and gas production – places such as Williston, North Dakota, where 40 workers have been building the Dakota Landing hotel since October.
“I just think this boom is going to keep going,” said Kim Hale, superintendent at the Dakota Landing site, who was himself out of work for more than three years. “I’m here until I get fired,” he said.
But it is the affluent whose sentiment appears to be improving most, as the gains in asset prices offset the impact of January tax increases that targeted those with higher incomes. The February edition of the Mendelsohn Affluent Barometer, which surveys households making more than $100,000 a year, found 52 percent of the well-off thought they would be doing better a year from now, an increase of 11 percentage points in just two months.
Banfi Vintners is the kind of firm that is benefiting. It says it can’t produce enough of its highest-end wine, which goes for $150 at restaurants. It is also fielding more requests to do tastings.
“We’re seeing these types of (luxury) events picking up, whereas in years past they were a little more quiet,” said Cristina Mariani-May, co-CEO of the winemaker. “Maybe those who had the money to spend weren’t willing to spend on these types of events. Now they’re selling out.”
Further down the scale companies are just not seeing such confidence. Government data released last week showed 47.79 million Americans received food stamps in December. Three months into the fiscal year, the average number of recipients was up 1 million on the prior year and 3 million on two years ago.
CEOs say people are mostly still buying staple goods, but beyond that a worryingly large number are not buying even the smallest extras.
“People don’t stop doing their laundry, you don’t let the trash pile up, but they may not go out to dinner or a movie or they may not take the kids to McDonald’s,” said Don Knauss, chief executive of Clorox Co (CLX.N), in a recent interview.
CUTS ALL ALONG THE SPECTRUM
The ranks of low-income Americans has been growing, and the middle class shrinking as government and manufacturing jobs have declined since the financial crisis.
According to Nielsen’s Homescan Panel, the number of U.S. households making less than $30,000 a year rose 9.7 percent from 2009 to 2012.
Carl R. Lebo had to give up his annual trip to baseball’s spring training pre-season warm-up camps – a favorite trip for some baseball fans – in Florida and Arizona three years ago. He and his wife limit their dining out to the restaurant where she works and gets a discount. They live in Delaware, and see their families in Pennsylvania less often than they would like because of the cost to drive.
“We do enjoy going out,” he said. “I certainly hope it’s not going to be permanent. I hope there’s going to be an upswing in the economy and that things are going to change for us.
“But right now there’s no change. It’s not as good as it used to be,” Lebo said of the economy.
The economy expanded 2.2 percent last year, but forecasters are looking for growth of only 1.9 percent this year, largely because of tighter fiscal policy in Washington. ECILT/US
“My guess is that (the tax hike) is impacting the economy more than initially thought,” said Tim Hopper, chief economist at the pension provider TIAA-CREF in New York.
CORPORATE AMERICA FEELS IT
For proof that the much of America is facing strains, one need only look at warnings from restaurant companies.
At least three national chains – Olive Garden parent Darden Restaurants Inc (DRI.N), IHOP parent DineEquity Inc (DIN.N) and Chili’s parent Brinker International Inc (EAT.N) – have said they are seeing fewer customers, and those they do see are spending less per visit.
SP 500 companies in the consumer discretionary sector are now expected to report first-quarter earnings growth of 8 percent, according to Thomson Reuters data – not bad, except that in early January analysts were forecasting growth of 13 percent and last October they expected 16 percent growth for the quarter.
If that 8 percent figure turns out to be right, it would be the weakest rate of earnings growth for the sector in at least six quarters.
Across income categories, the latest Thomson Reuters/University of Michigan consumer sentiment index actually rose 4 points in February, as people grew more optimistic over the jobs picture.
But try telling that to someone like Lawrence Beliz, 68, of Escondido, California, whose wife is unemployed and looking for work.
They have had to cut their restaurant spending in half, when they can even afford to go, and the next step is to cut back on driving to save money in California’s expensive gas market.
Ask Beliz if he expects the economy to improve, and you’ll get an answer that sums up the deep-seated pessimism that is still pervasive.
“Not at all,” he says. “I expect it to collapse completely.”
(Reporting By Martinne Geller, Dhanya Skariachan and Phil Wahba in New York, Lucia Mutikani in Washington and Lisa Baertlein in Los Angeles; Writing by Ben Berkowitz; Editing by Martin Howell and Claudia Parsons)
SAN FRANCISCO |
SAN FRANCISCO (Reuters) – With the jobs market showing signs of healing, economists think they know what’s next for monetary policy: the Federal Reserve will at some point taper its monthly bond purchases, and soon after, end them altogether.
But perhaps they shouldn’t be so sure.
The Fed is currently buying $85 billion in mortgage-backed securities and Treasuries to inject more money into the economy to help boost growth and hiring. Friday’s report of better-than expected jobs growth in February boosted speculation that the Fed may trim those purchases sooner than previously thought.
The view that such a move is necessarily a prelude to the program’s end sets markets up for an economically damaging spike in interest rates, and quite possibly a slump in stock prices, at the first hint that the Fed is ready to dial back its third round of bond buying, or quantitative easing.
And that’s an outcome Fed Chairman Ben Bernanke and other top central bank officials will want to avoid.
“When they do begin to exit … they very well could indicate that the quantitative easing could get bigger or smaller, as a way to reinforce their flexibility and keep rates markets from selling off too much,” said Eaton Vance portfolio manager Eric Stein, a former analyst at the New York Fed.
The Fed is not expected to change the bond-buying program when its policy-setting panel meets next week, and most top Wall Street economists expect the Fed to continue to buy bonds through 2013 and into 2014.
But seven of 11 top Wall Street economists polled by Reuters on Friday also believe that if the Fed does reduce the pace of its bond-buying at some point, the move would signal that it is aiming to shutter its program within a few months.
To counter that expectation and soften the market impact, Fed officials will want to make clear that they could ramp the program back up again if the jobs market weakens, said Wells Fargo economist John Silvia.
The message “may surprise the market, but it will be very reassuring that they are not in a game where it’s black and white,” Silvia said.
From the very start of their open-ended bond-buying program last September, U.S. central bank officials said they wanted to be able to slow or speed the pace of their purchases depending on signals of the economy’s health.
But doing so poses difficult challenges.
Schooled by years of careful Fed watching, investors pretty much know what to expect when the central bank begins raising or lowering rates.
But the Fed has been holding short-term rates near zero since December 2008, and has pledged to keep them there for a “considerable time” even after the economy strengthens.
Investors meanwhile have little experience with what to expect if the Fed adjusts its pace of bond purchases and, by extension, the size of its hefty asset holdings, now worth $3 trillion.
“There is some growing sentiment for using the balance sheet a little more actively as a policy tool,” Peter Hooper, chief U.S. economist for Deutsche Bank Securities, said last week. “But I also see problems with the communication issue, and making things clear to the market.”
Problems could include choppy market reaction, as traders digest potentially conflicting messages from Fed officials with divergent views on where policy is likely to head, as well as economic data releases.
When minutes from the Fed’s January policy-setting meeting were released last month they showed that a number of Fed officials thought the cost of bond buying might force an end to it before the jobs market improves. In response, yields on 10-year Treasuries rose near the quarter’s then-high of just over 2 percent.
Then, Bernanke delivered a vigorous defense of the program, pushing down bond yields, which later rose again as economic data showed the jobs market was improving.
On Friday, a government report showed U.S. employers added 236,000 jobs to their payrolls last month, many more than analysts had expected.
Even after February’s strong jobs showing, Navigate Advisors LLC managing director Tom di Galoma still sees the Fed continuing its purchases through at least year end, “if not even further into the future.”
But if the Fed does move to scale back purchases, rates could rise dramatically, with a $15 billion monthly cut pushing the yield on the 10-year Treasury to near last year’s high of 2.38 percent, he said.
The stock market could also tank, said Jack Ablin, chief investment officer at BMO Private Bank in Chicago.
“I think if the Fed announced a reduction in its asset purchases, it could upset the stock market,” sending the Standard Poor’s 500 Index to 1500 or below, he said. The SP 500 Index closed on Monday at 1556.22.
If history is any guide, Federal Reserve policy shifts after long periods of policy easing can be jarring.
In February 1999, when Alan Greenspan, then Fed chairman, initiated a surprise tightening, financial assets were dealt a body blow. Over the ensuing three months, the total return for Treasury debt was a negative 6.2 percent, according to Bank of America Merrill Lynch Fixed Income Index data, and the Standard Poor’s 500 index sank 7.25 percent on a total return basis.
Many Fed officials, including some of Bernanke’s closest allies on the policy-setting panel, see the bond-buying program continuing for some time.
Chicago Fed President Charles Evans, whose views on the ideal path for Fed policy have shaped the central bank’s stance, wants to see six months of jobs gains topping 200,000 before he would pare bond buying.
And some economists think the market is not adequately pricing in the possibility that the Fed could do more to ease policy, as Minneapolis Fed President Narayana Kocherlakota has advocated.
“Open-ended doesn’t only mean you reassess it from meeting to meeting – it would mean that you are open to an increase,” said Clark Yingst, chief market analyst at Joseph Gunnar Co in New York. “I think the market is not open to the possibility.”
(Additional reporting by Ellen Freilich, Julie Haviv, Chris Reese and Jonathan Spicer in New York; Editing by Daniel Burns, Martin Howell and Tim Dobbyn)
WASHINGTON (Reuters) – Confidence among small businesses rose in February as owners shrugged off a tightening in fiscal policy and raised plans to increase capital spending and restock their warehouses.
The National Federation of Independent Business said on Tuesday its optimism index increased 1.9 percentage points to 90.8 last month, continuing to recover from a 2-1/2 year plunge in November.
The improvement in sentiment came even as small businesses braced for about $85 billion in across the board government spending cuts that started to take hold on March 1.
A two percent payroll tax cut expired on January 1 and tax rates for wealthy Americans went up.
Capital spending plans gained four points, while plans to increase inventories climbed six points last month. The share of owners viewing inventories as too low rose two points.
Owners’ outlook for business conditions in the next six months also improved two points.
Their perceptions of labor market conditions also improved, with the modest gains in the shares of owners planning to add jobs and those saying job openings were hard to fill.
Small business owners’ views of sales and credit conditions also improved last month.
(Reporting by Lucia Mutikani; Editing by Neil Stempleman)
WASHINGTON (Reuters) – A bounce back in vacant retail positions lifted the number of jobs open in the United States in January, but the overall tone continued to point to only a moderate improvement in the labor market.
Job openings – a measure of labor demand – increased to a seasonally adjusted 3.7 million in January from 3.6 million in December, the Labor Department said in its monthly Job Openings and Labor Turnover Survey on Tuesday.
Retail sector job openings increased by 34,000 in January after declining the prior month. Job openings in manufacturing and construction rose modestly. There were also a small increase in government job openings.
Vacancies declined in education and health services, and leisure and hospitality.
(Reporting by Lucia Mutikani; Editing by Lisa Von Ahn)
NEW YORK |
NEW YORK (Reuters) – Stocks edged lower on Tuesday as investors paused after a seven-session string of gains and the Bundesbank’s chief warned the euro zone’s crisis has not ended.
Both the Dow and benchmark SP 500 index have rallied for seven consecutive sessions, with the Dow closing at another record high on Monday and the SP within 10 points of its all-time closing high of 1,565.15, set on October 9, 2007.
Any pullback may be short-lived, however, as investors have been using recent dips as a buying opportunity.
Sounding a note of caution in Europe, Jens Weidmann, head of Germany’s central bank and a member of the European Central Bank’s governing council, said the euro zone’s “crisis is not over despite the recent calm on financial markets,” adding that the region’s economic stability remains on shaky ground.
“The thought is they have their problems and they are working on those problems, just as we did,” said Frank Lesh, a futures analyst and broker at FuturePath Trading LLC in Chicago.
On Wall Street, investors’ confidence has grown, leading to a gain of more than 10 percent for the year by the Dow and more than 9 percent by the SP. Signs of improvement in the economy and the Federal Reserve’s quantitative easing have helped to drive the gains.
The boost in confidence was reflected in the Chicago Board Options Exchange Volatility Index .VIX, Wall Street’s so-called fear gauge, which gained 2.8 percent to 11.88 but was at its lowest intraday level since April 2007.
“The data has been improving. No horror stories out of Europe at the moment, and China is on the mend. There is nothing out there that tells you anything besides ‘stay long and be long,'” said Lesh.
The Dow Jones industrial average .DJI shed 7.80 points, or 0.05 percent, to 14,439.49. The Standard Poor’s 500 Index .SPX slipped 1.89 points, or 0.12 percent, to 1,554.33. The Nasdaq Composite Index .IXIC lost 6.33 points, or 0.19 percent, to 3,246.55.
Merck (MRK.N) shares jumped 4.4 percent to $45.60 to help curb declines on both the Dow and SP after the pharmaceutical company said an independent monitoring board had allowed it to continue with a large trial assessing the safety and effectiveness of its Vytorin cholesterol treatment.
Retailer Costco Wholesale Corp (COST.O) posted a 39 percent increase in quarterly profit, beating expectations, on increasing sales, membership fees and a tax benefit related to a special cash dividend. Costco shares gained 1.5 percent to $104.02.
Yum Brands Inc (YUM.N) advanced 3.4 percent to $70.06 after the parent company of the KFC restaurant chain reported an unexpected rise in February sales in China.
(Reporting by Chuck Mikolajczak; Editing by Chizu Nomiyama, Kenneth Barry and Nick Zieminski)